Bankruptcy

[Didwot]

A lot of people without any assets are up to their ears in debt with credit cards, loan companies etc. generally as a result of imprudent lending by the financial institutions (obviously none of the financial institutions who employ ABers fall under that description)
With the bankruptcy period reduced to one year the time has come for these debtors to march down to their local court and present their own bankruptcy petitions. Other than the fear of some stigma, why don't they?

[Oneeyedvic]

Because, firslty, although it only lasts one year (in normal situations) it will remain on their credit file for 6 years; secondly it means that they can no longer drive around in their flash car (which is a cause of their debt); thirdly, they may face repossession of their house; and fourthlly (and hopefully) people have a sense of commitment - ie they took out these loans - they want to pay them back.

 

Also, why is it it imprudent to lend - surely it is imprudent to borrow more than you can afford?

[Didwot]

I do not disagree that it is imprudent to borrow more than you can afford to repay, but the financial institutions have to take responsibility for their part in giving the loan. If an indigentr asked me to lend him some money I would refuse, yet it seems some financial institutions are happy to part with their money in the hope of high interest rates. You are in the business, and have no doubt come across people who are financially naive, yet have been able to borrow far beyond their means, and are taken aback when told quite how much it is all going to cost to repay. They have the excuse of greed, stupidity or inexperience, but the lender can only use the excuse of greed.

[Loosehead]

I agree with vic 100%.

It's a have it now society must have a new car, why? it'll be worth less than half in a year? Never ceases to amaze me why people run up debts for things that they don't need, why must you have that new leather sofa? Get in debt to go on holdiday you must be mad! Saving for something you really want has gone out of the window and so, therefore has appreciation of said item. I remember the total satisfaction of working one summer and buying a new bike, I own it, I bought it with my own toil, I guarded it with my life. I just feel so sorry for a lot of people today who'll never have that satisfaction. I mean it's not as if most people have anything to show for their debts. As I work now I look out of the windo into the car park, some pretty flash moters out there, I bet 90% are on tick, so they don't owne them, the cars are the millstones of the owners. There are very few things acceptable to buy on credit, a house for example.

Yes I'm with Vic it's the borrowers, It's like trying to blame McDonalds there are fat people.

[andyjevs]

I'm currently in that very debt situation above. I don't have a flash car or anything else that's flash but i do have a shared ownership property which i have a mortgage for 50% of the value and no equity. My greatest fear with bankruptcy is losing the house. Any suggestions ???

[Didwot]

In response to Loosehead, are the financial institutions to accept no responsibility for letting people borrow more than they can afford?
In response to andyjevs, if the property is genuinely out of equity, Ie its value does not exceed the mortgage then the Official Receiver will be happy to sell your share in the property to your co owner for a nominal sum of �1 plus payment of their legal costs set at �211. The important thing is to make sure that the Official reciever is aware that the property is genuinly not worth more than the mortgage (documentary evidence please) and that your co owner wants to take back your interest in the property> The insolvency service publis a useful booklet called "what will happen to my home whiich you can get at http://www.insolvency.gov.uk/pdfs/guidanceleafletspdf/ho me.pdf
Good luck.

[Oneeyedvic]

Didwot - let me just say (as I have before) - I am a finance broker - i specialise in finding finance for people (predominately businesses) get funding for assets (including vehciles).

On the consumer side. I don't get many proposals for prime rates - the majority of local dealers only use me when they have been turned down by the major prime lenders.

I regularly see proposals for people who want BMWs, Mercs etc who have even gone four down on their mortgage payments in the last 12 months. Most will have CCJs (albeit some of them satisfied), and some will have other issues. These people are not naive - they are plainly stupid. However there are lenders who are willing to lend tpo them albeit at a high rate.

Should I ethically try to get someone finance who I think shouldn't get it? Well, maybe I shouldn't - but then if I see a fat person buying a burger, should I stop them? If I see a kid trying to buy cigarettes, should I do something about it?

Ethics are all well and good, but I am certainly not doing anything illegal, and I would also point out that all of my customers know exactly what the reapyments are before they enter into an agreement - that then makes it their choice.

[Loosehead]

Didwot said "Are financial insitutions to accept no responsibility for letting people borrow more than they can afford".

Well there is some resposibility but no more so than an off licence that sells booze to a wino, you see they'll get it somewhere. I agree the lenders are lax but a creditaholic always thinks they can handle it and if a lender turns them down it's becasue of some fault with the lender, not because they've got 15 credit cards and 5 Hp agreements. They go somewhere else, I mean look at vic's post about the people with CCJ's and debts up to their eyeballs still wanting a new Merc! Primary responsibility is with the individual.

[Didwot]

Thank you for your response oneeyedvic. I had not intended to suggest that you, or the finance companies, were doing anything illegal. As a broker your duty is to try to get finance for your customer, but the finance company must make a commercial decision as to whether or not to lend, and surely this should not encompass what might be termed imprudent lending. To continue your burger analogy, the restaurant should not expect to be paid having persuaded Mr Creosote to eat the wafer thin mint. If the borrower takes on too much debt then the lender should (and indeed does) expect to write off its loan.
My originmal point was, that being mired in debt, and without assets, why do not more debtors take advantage of bankruptcy. So what if they have a black credit record for six years. They are going to have that anyway as they struggle with debts they cannot meet. Being in a hole should they not stop digging? I think the real answer may be lack of knowledge of this option, and misplaced fear of what it involves.

[metagirl]

Agree with you wholeheartedly Didwot. I have tried to fight the corner of "responsible lending" by financial institutions in previous threads. As mentioned previously I worked at a cooperative bank in California where we made sure that people could afford what they asked to borrow. Some people don't realise the burden an extra �150 a month can be when added to their other financial commitments. And we felt that it was our duty, because we had more knowledge of this, to tell them.

And no, it wasn't to buy top of the line cars. That is a sad fallacy used by people to blame working people who are just trying to get on in the world.

[Oneeyedvic]

metagirl - Firstly, I have no knowledge of the States, their banking policies or their economy so I will only comment on the English system.

I would be curious as to what you deem responsible lending to be? Is giving someone a loan to clear up all the other loans he has got into arrears over responsible? Is giving someone money to buy a Vauxhall Omega (the highest depreciating car I can think of) responsible. Should the lender say "you don't want to do that".

Is it responsible to give a mortgage to somebody who will increase their earning in the next few years (like a solicitor or accountant) Is it irresponsible to give any loan without adequate life cover to be in place?

Is it responsible to lend money if you are aware that there are more competitive companies out there? Should you be able to go into NatWest and the staff there will say "sorry Mr Customer, please go to Lloyds - their rates are far cheaper"

Personally, I think that the system is okay. you do get some people who suffer but why? In this country (as opposed to the states), there are free council houses, income support / job seekers allowance if you don't work, free health care, grants to help if you have a baby, disability, care for someone etc etc. There really is no excuse to be in huge amounts of debt unless of course you want a bigger tv, a car, etc etc.

[Oneeyedvic]

Didwot - to answer your primary question - why don't people go bankrupt? - I am fairly sure it is because of the reasons I gave in my first post - and hopefully, I belive honour is an integral part of our society. If we started becoming dishonourable, surely society would fall down and not to overdramatise or anything but anarchy will reign.

Imagine calling a plumber out - �60 is what he charges you. No, sorry mate, I have decide I'm not going to pay!